Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Saks Incorporated (NYSE:SKS)

Q3 2007 Earnings Call

November 20, 2007 10:00 am ET

Executives

Stephen I. Sadove – Chairman and Chief Executive Officer

Ronald L. Frasch – President and Chief Marketing Officer

Kevin Wills – Executive Vice President and Chief Financial Officer

Julia Bentley – Senior Vice President of Investor Relations

Analysts

Dana Cohen – Bank of America Securities

Shelley – Bear Stearns

Deborah Weinswig – Citigroup

Todd Slater – Lazard Freres

Hillary Morrison – Lehman Brothers

Michelle Clark – Morgan Stanley

Michelle Tan – UBS

Enya Watts – Sykes

Carla Casella – JPMorgan

John Lowman – KDP Investments

Operator

Good morning. My name is Deness (sic) and I will be your conference operator today. At this time I would like to welcome everyone to the Saks Incorporated third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions) I will now turn the call over to Mr. Steve Sadove, Chairman and CEO of Saks Incorporated. Please go ahead, Sir.

Stephen I. Sadove

Thank you very much. This is Steve Sadove, Chairman and CEO of Saks. I’m joined today by Ron Frasch, President and Chief Merchandising Officer, Kevin Wills, CFO, and Julia Bentley, Senior Vice-President of Investor Relations. I would like to thank each of you for taking the time to join us today.

Today we’re going to discuss the financial results for the third quarter and nine-month ended November 3rd, 2007, and update you on several other business matters. At the end of the call we’ll be glad to respond to any questions you might have.

Let me note that some of the comments on the call today, as well as some of the information presented in our earnings release related to future results or expectations are considered forward-looking information within the definition of the federal securities laws. The forward-looking information is premised on many factors and actual consolidated results might differ materially from projected information if there are any material changes in our assumptions. For a description of the meaningful risks and assumptions related to these projections please refer to the release in our most recent filings with the SEC, including our most recent Form 10K.

I’ll ask Kevin to briefly comment on the third quarter performance and the balance sheet.

Kevin Wills

Thanks, Steve, and good morning, everyone. For the third quarter we realized substantial improvement in operating performance primarily driven by our 11.4% comparable store sales increase and expense leverage.

Our third quarter net income totalled $21.6 million or $0.14 per share, which included approximately $4.3 million or $0.03 per share of net after-tax charges primarily related to severance, retention, and transition costs, asset impairment and dispositions, a tax reserve adjustment, and investigation and related legal expenses.

This performance compares to the prior year third quarter when the company posted income from continuing operations of $12.5 million or $0.09 per share, which included after-tax charges netting $4.2 million or $0.03 per share related to severance, retention, and transition costs, asset impairment and disposition, investigation and related legal expenses, and a one-time pension gain.

Excluding the certain items just mentioned, our third quarter operating income totalled $51.3 million, a 53% increase over $33.5 million last year.

Let me now make a few comments on the balance sheet. Quarterly and comparable store inventories increased approximately 17% over last year, attributable to a planned increase at SFA. As a reminder, current inventory levels reflect our ongoing initiative of a targeted inventory re-investment strategy begun in the fourth quarter of 2006. These investments have been based upon a detailed planning process for our entire store base and a review of benchmark and competitive data, and are contributing to our increased sales productivity.

The incremental inventory relates to replenishment or continuance of product which we believe has minimal markdown risk and also to strategic investments in key items and vendor intensifications in such high potential areas as shoes, handbags, men’s, and in certain core designer ready-to-wear brands. We believe these investments carry low to moderate risk and we continue to experience above average growth in all of these areas. We also continue to expect that our inventory levels will be more in line with sales growth at fiscal year end.

We ended the quarter with approximately $63 million of cash on hand and $25 million of direct outstanding borrowings on our $500 million revolving credit facility. The revolving credit facility borrowings were used to fund third quarter working capital needs and have subsequently been repaid. Funded debts, including capitalized leases, at quarter end totalled approximately $599 million and our debt to capitalization ratio was 34.7%, and this is without giving effect to the cash on hand.

We repurchased approximately 1.7 million shares of common stock and our average price was $15.95 during the quarter. We have remaining availability of approximately 35.7 million under existing share repurchase authorization programs.

I will now turn you back to Steve.

Stephen I. Sadove

Thanks, Kevin. We’re pleased with the year-over-year improvement of our third quarter operating results. This improvement primarily was driven by strong comp store sales growth and expense leverage. Our third quarter comp store sales increase of 11.4% indicates that our customers are continuing to respond to our strengthened merchandise selections, service initiatives, and innovative marketing. Both the number of transactions and the average dollars per transaction rose during the quarter.

Many of our merchandise categories performed very well in the quarter. We experienced outsized growth in our accessories area with footwear, hand bags, and fine jewellery all growing in excess of 25%. Worth noting is that our jewellery increase was meaningfully driven by a significant increase in large transactions. We also continue to see substantial growth in our men’s business, which generated double-digit growth in all categories.

We generated solid performance across all geographies and store sizes. Our New York City flagship location once again outperformed the company average and was a beneficiary of increase store traffic driven in part by the August opening of 10022-SHOE and robust tourism, even though the eighth floor was closed for renovations at the beginning of the quarter. Ron will tell you more about our New York City footwear initiative shortly.

Our strong third quarter sales performance was achieved despite the disruption associated with several recently completed major remodelling projects in addition the New York flagship shoe floor, which included South Coast Plaza in Los Angeles, Boston, Phoenix, and Palm Beach Gardens, Florida, s well as some smaller renovations projects in San Francisco and Chicago.

The renovation and expansion of Naples has begun and it’s scheduled for completion in the fallout next year. We plan on more similar renovations in 2008.

In each of the projects I just mentioned we are focused on making targeted investments, particularly in high-impact vendor shops and first floor selling space, with a heightened focus on return on investment. A great example of the success of this focused main-floor capital strategy is the renovation of our Beverly Hills flagship, which was completed last December. As you’ll recall, we remodelled and expanded hand bag shops for several existing vendors like Gucci, Prada, Chanel, and Louis Vuitton, added a Bendy Shop, and undertook a complete renovation of our shoe and jewellery department. This renovation and the enhanced inventory assortments drove a nearly 40% sales increase in these businesses for the third quarter.

Our capital spending should total between $135 million and $150 million for the full fiscal year.

We have meaningfully improved the customer experience this year through both the implementation of our new point-of-sales clientelling system and the continued rollout of our commission program. Our one-of-a-kind clientelling system is fully operational in 23 stores and provides very detailed customer data at the point of sale and allows our associates to communicate with and service their clients with much more frequently and effectively. The system will be implemented in the balance of the store base in 2008.

Our performance-based commission programs have been expanded to nearly 90% of our sales force. These changes are contributing to our comp store sales growth.

Let me talk for a minute about gross margin. Our 11.4% comp store sales increase in the quarter exceeded our expectations of a high single-digit increase and was even more noteworthy given our 8.8% comp growth in last year third quarter. However, during the quarter we began to experience a more promotional and challenging macro-economic environment and this environment resulted in some modest downward pressure on our merchandise margins, particularly in the women’s bridge apparel area.

In addition, while our key promotional events, such as Friends and Family and electronic gift card events, were essentially the same year over year, our customers shifted more of their spending to these events causing some additional pressure on merchandise margins. This modest decline was offset by the impact of unredeemed gift cards that were able to generate a flat year-over-year gross margin rate for the quarter. Remember, we were able to expand our gross margin rate by 100 basis points in the third quarter last year.

Longer term, we continue to believe we have an opportunity to drive significant gross margin rate improvement as our strategic initiatives to redefine processes, roles, and responsibilities in system changes are implemented. Ron will talk more about these shortly.

Excluding the certain items, such as retention, severance, and transition expenses, investigation related expenses, and the prior year pension gain, third quarter year-over-year SG&A expenses increased by approximately $23 million, principally related to the higher variable expenses associated with our nearly $100 million sales increase. In order to drive comp store sales growth we continue to make targeted investments in such areas as selling, payroll, and marketing. Excluding the certain items, we achieved approximately 30 basis points of leverage in the third quarter SG&A expense.

As we have previously discussed, our SG&A leverage has moderated over the last two quarters as the significant cost reductions and leverages achieved in prior quarters have been anniversary. Specifically, our third quarter 2006 SG&A leverage was approximately 300 basis points, excluding certain items.

We remain very focused on our expense structure and will continue to seek operating efficiencies while also investing for the long term. Additionally, we were able to reduce other operating expenses – rents, depreciation, and taxes other than income taxes – by 140 basis points in the quarter.

On the marketing front we successfully executed our Fall Wanted program in this quarter featuring key items such as capes, textured cardigans, and high heels for women, and tuxedo dressing and novel ties for men. This bi-annual campaign grows in importance each season and is supported by marketing, in-store events, visual displays, and heightened clientelling.

We also have many exciting marketing and events planned for the holiday season. And we continue to focus on increased customer acquisition and retention, and rebalancing our marketing spent through more targeted and localized efforts.

The growth of Saks Direct continues to substantially outpace the company average posting another approximate 40% increase during the third quarter. We recently completed our total redesign and upgrade of the site, adding more features and making it more interactive and easy to use. We continue to add new vendors and merchandise to upgrade our service and our customers are responding by buying more products and more frequently on line. We expect to have a record breaking fourth quarter in the Direct business and to continue to drive outsized growth in 2008 and beyond.

Off 5th is continuing to show improvement as we further refine the merchandise assortment with more direct purchases from core vendors and as we introduce additional private brand product to the stores. Let me ask Ron to make some comments about merchandising and systems initiatives.

Ronald L. Frasch

Thank you, Steve. Before I brief you on some of our core merchandising initiatives I’d like to take an opportunity to speak to you about our 10022-SHOE concept in our New York City flagship.

A few years ago we began to think about ways to distort our footwear business by doing something very special. This was served not only as a volume driver, but as a draw to bring the local New York customer into our store. By the time we were done we had almost the entire eighth floor filled with 100,000 pairs of shoes housing 50 brands with nearly 100 selling associates with, as you know, it’s own zip code.

What’s been truly remarkable about the success of this initiative is the cross functionally collaboration that went into executing the concept. Our merchants, construction team, store management, sales store associates, human resource group, and marketing and special events team worked together as never before to execute 10022-SHOE.

We also learned a few things about what we can do and how high is high. We changed our buying approach. We injected more fashion into the assortments. We changed our hiring profile, focusing the criteria more on service and fashion than on a specific category or even retail experience. And we enhanced our floor layout, making it a more social selling environment. All of this seems to be paying off as we are projecting to double our volume for this important category in the New York store in the first 12 months of operation.

As you probably recall, early last year we embarked on several important merchandising projects that I believe will be key drivers for sales and gross margin improvement in ’08 and beyond. Our parallel planning process, which began as a phased approach in spring ’06 and has now been completed for our entire store base. As a reminder, this is a collaborative process between buyers, planners, marketing and store managers to ensure understanding of the core customer in each of our stores. And we are successfully using the nine-box grid approach to make more targeted inventory investments in each of our stores.

We completed the implementation of our I2 merchandise planning system in spring ’07 to affect the fall ’07 merchandise plan. This financial planning process is enabling our planners and buyers to better maximize the social opportunities of our stores by focusing the plans of fashion delivery, by allocation, and full-price sales. We are currently making some modifications to the initial version of the I2 system and would anticipate realizing the full benefit of the system in the second half of ’08.

Most of this year we’ve been working closely with Kurt and Salomon Associates, KSA, to further enhance our assortment and allocation effectiveness. The major thrust of this work relates to better buy and pre-market processes supported by improved clarity around roles and responsibilities. We’re investing incrementally in both systems and people to go to merchandising organization that will enable us to deliver these improvements. We have worked with KSA to make modifications to our new assortment planning and allocations systems and continue to make further refinements.

Related to this organizational structure, our longer term plans are to operate with nearly one-to-one buyer-to-planner ratio versus our previous ratio of only one planner for every three buyers. By increasing this ratio believe that our buyers will be able to spend more time in the market developing assortments that fit the specific needs of our varying store base and customers while providing much needed increase and liveable support.

We have rolled out the KSA buying and pre-market process changes in our men’s division, which represents about 15% of our business. The men’s area made their first buys under the new systems and processes for spring ’08 and we believe that we’ll begin to see gross margin expansion in this area beginning with the first end of ’08.

We are currently rolling out the new KSA processes in our accessories division, which represents about 25% of our volume, and plan to complete the roll out in women’s ready to wear, another 40% of our volume, in the first half of ’08, with gross margin expansion being realized in fall ’08 and ’09 respectively, respectfully in these areas.

Our approach to change has been phased, intentional, and to plan. We’re trying to minimize disruption and are closely monitoring our results and making adjustments as necessary. I’m pleased with the progress we have made to date.

Now that we feel confident in the changes and enhancements of our buying process, which I call, we have initiated the second phase of our strategy. Working with KSA to drive our selling focus throughout the company. Having the right product in the right stores is only half of the challenge. We have to focus our selling force on driving the product out the door at full price. Similar to the changes we’re making in the merchandising organization and processes, this serves as a major change for the organization.

I view these two initiatives as interlinked. We are looking at everything from how we get our goods onto the floor to the roles and responsibilities of our selling managers. We’re reviewing and enhancing our in-store training, strengthening our own boarding, and streamlining our back-of-house processes in order to free up our selling management. We’re updating our hiring profile, placing much more weight on service and fashion and less on retail or category experience.

I feel that with a combination of focusing on product and selling we will position ourselves well for the future. Steve?

Stephen I. Sadove

Thanks, Ron. I think we’re well positioned for the fourth quarter. Our merchandise selections have been carefully tailored by market, our holiday marketing and events are under way. Our service and clientelling efforts are in full swing, and our stores look great.

I continue to believe that we are poised to achieve an operating margin of approximately 4% this year. Our expectation is that we can generate high single-digit comp store sales growth in the fourth quarter on top of last year’s fourth quarter comp increase of 9.9%, but that we may experience modest decline in gross margin rate for the period.

We believe our inventories are appropriately positioned as we enter the holiday season. However, it’s clear that we’re now operating in a more challenging, economic, and competitive environment. As we have previously noted, during the prior year fourth quarter we generated a year-over-year gross margin rate improvement of 430 basis points, which included an approximate 50 basis-point benefit due to the inclusion of the 53rd week. We still expect modest SG&A expense leverage for the fourth quarter.

I’m very pleased with substantial progress we’ve made since early last year positioning the business for the future. In summary, some key takeaways are that, one, we completed the consolidation and integration of all the corporate functions so that our organizational structure has been streamlined and appropriately sized. We are still looking for efficiencies in ways to reduce our cost structure.

Our by-store merchandise assortments have been substantially improved resulting in outsized comparable store sales gains and expanded gross margin. We’ve continued to improve the customer experience and increase comp store sales through the implementation of our new point-of-sales clinetelling system and the expansion of our performance-based commission programs.

We’ve developed a comprehensive plan to implement additional refinements to the merchandise, planning, and allocation organization, processes, and systems, and have recently initiated a comprehensive review of our store organization and processes. Both of which should further improve our growth margin and operating performance over time.

We’ve continued to make targeted capital investments, particularly in high impact vendor shops and first floor selling space. And during the quarter we reached a settlement with the SEC and resolved two actions involving vendors, putting these matters behind us.

I remain optimistic about the long-term potential of the luxury sector and the Saks Fifth Avenue business in particular. We have a focused, talented, and committed team and we have meaningfully improved the merchandising, marketing, and service levels of the business.

We’re in the early stages of implementing the systematic and operational changes that are required to generate significantly improved operating performance and to close the gap in operating margins with our peer group. I continue to be optimistic regarding our long term strategic plan and believe we can deliver additional operating expansions in 2008 and beyond as we benefit from these current and ongoing strategic initiatives.

The improvement in operating margin is predicated on substantially improving the productivity of our store base, enhancing our gross margin performance, and leveraging our expense structure over time. I remain confident that we can expand the operating margin to approximately 8% over the next three years or so.

At this time we’d be pleased to entertain your questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) We’ll pause for just a moment to compile the Q&A roster.

And our first question will come from the line of Michelle Clark with Morgan Stanley.

Michelle Clark – Morgan Stanley

Yes. Good morning. Thank you. First question, you commented on a more challenging macro-environment. Can you just give us some more specifics on what you’re seeing here? Any regional variation to make note of?

And then the second question is, on the gross margin the basis point impact coming from the unredeemed gift cards and is that something that we should expect to continue in the fourth quarter? Thank you.

Stephen I. Sadove

Okay. I’ll talk to the competitive environment and the macro-environment. I’ll ask Kevin to talk on the gift cards.

I think that the environment is getting tougher out there. I still think that the luxury sector is very healthy. I think that the consumer is, you know, I think that the consumer is clearly seeing some impact, especially at what we would call our good zone. Remember, we’re always thinking in luxury terms, but we’ve looked at it from a good-better-best luxury price points and I think that you’re seeing more pressure on that aspirational luxury consumer that would be our bridge price points, our entry price points as where you’re seeing more of the pressures at the higher-end luxury price points and not seeing a slow down. We feel quite good about that consumer’s buying power at this point.

I think that you still have a very healthy DOW at the 13,000 level and I think that overall we feel quite good about where the fourth quarter is. But clearly you’ve seen some more price competition at the lower end of that spectrum.

Let me have Kevin talk to the gross margin.

Kevin Wills

Sure. Michelle, there were a number of components that go into the gross margin and we do not break out the specifics of each of those components. But as we noted in the press release this morning, we did experience a modest erosion in our core gross merchandising margins and the favourable experience in the quarter in unredeemed gift cards offset this such that we were able to get back to flat.

Michelle Clark – Morgan Stanley

And should we expect that to continue, the benefit from the unredeemed gift cards in the fourth quarter or is that just the one-time event in the third quarter?

Kevin Wills

I do not anticipate any meaningful benefit for fourth quarter and beyond. The unredeemed gift cards fluctuate by quarter, but I would not anticipate there being any meaningful benefit for the fourth quarter and I think that is reflected in our outlook for the fourth quarter of a modest decline.

Michelle Clark – Morgan Stanley

Right. Thank you.

Operator

Our next question will come from the line of Deborah Weinswig with Citi.

Deborah Weinswig – Citigroup

Good morning and congratulations on a great quarter.

Stephen I. Sadove

Good morning, Deb.

Deborah Weinswig – Citigroup

Steve, you talked about kind of, you know, as previously discussed, this kind of more competitive macro-environment. Can you talk about any, you know, changes or tweaks in your marketing plan? And it also sounds like you guys have been a little bit more localized.

Stephen I. Sadove

Well, clearly we’re being more localized, both from an assortment and from some of the marketing outreach ident programming that we’ve been doing. I think that the promotions that we’re running are essentially the same, if you were looking on a calendar-to-calendar basis. What we’re seeing is and we’re responding in some ways to competitive environment, especially where we talked about in the bridge price points in terms of some accelerated clearance cadence so that where some of our competitors have been marking down more aggressively at some of the bridge price points we’re going to be competitive and meet some of those mark downs.

But I think again this is more what I would have called that good price point, bridge price points that we’re dealing with overall. But I think that clearly we’re being localized. Things like on a local basis where we’ve been doing some luxury jewellery events, an example. Direct marketing programs have been benefitting us. You saw I mentioned the outsized growth that we’ve been seeing in fine jewellery, that’s an example of some of the localized programming that we’ve been doing.

Deborah Weinswig – Citigroup

And then, Ron, you talked about the I2 merchandising system and that it did have some impact on the fall planning. Can you maybe elaborate on that?

Ronald L. Frasch

Yes, Debbie. What it did was it allowed us to plan our business at the individual delivery level much more thoroughly and completely, allowing visibility into seasonality of the deliveries and the planning of the south roads and subsequent disposition of the product.

Deborah Weinswig – Citigroup

Okay. And then last question for Steve, there’s, I mean, you clearly are doing an amazing job in Direct and I would say seeing a much better growth in a lot of your competitors. Can you talk about what you’re doing specifically there and will you expect those trends to continue?

Stephen I. Sadove

We feel terrific about the Direct business. If you step back from it, up until two years ago we really didn’t have the full capabilities. There was a long period of time where we were sourcing the product through the stores. We didn’t have the fulfillment capabilities. We established that in our Aberdeen, Maryland, facility. And that allowed us to really start marketing the business and build the vendor matrix.

Over the last year and a half or so we’ve really expanded the vendor matrix. We’ve started to accelerate our marketing activities. We’ve been much more competitive in our search dollars that we spend in marketing. And in terms of the consumer response, we’ve been able to build the E-mail database, we’ve been able to start doing the marketing to the customer, we’ve been able to meet that customer’s need both in terms of in the store and online because that dual customer is actually a very important one for us. And we’re continuing to see very outsized growth.

Looking ahead, we’ve also learned, by the way, that it’s a more fashion conscious customer. It’s a little bit younger than our full line customer. So we’ve been able to tailor the assortment for that customer.

Looking ahead, I continue to see outsized growth out of Direct. We’re feeding it. We’re also starting to use it beyond just a selling channel to being a marketing channel. An example of that is if you went on the website after the last season shows you saw our videos where we had a summary of the New York shows. So you’re going to see more of that. You’re seeing more of vendor description, videos that describe Denver’s products. And helping us establish ourselves as our edited point of view.

So I’m very optimistic that Direct will have outsized growth, but it’s also going to be an even more integral part of the marketing of the business.

Deborah Weinswig – Citigroup

Great. Thank so much and best of luck this holiday season.

Stephen I. Sadove

Thanks.

Operator

Your next question will come from the line of Dana Cohen with Banc of America.

Dana Cohen – Banc of America Securities

Hey, guys. Couple questions. Just wanted to go back on the gift card breakage. I mean, assuming something less than 100 basis points in terms of gross margin pressure, would it be fair to think that the gift card breakage could have been as much as $0.02 to the quarter.

Kevin Wills

Sorry, Dana, as we indicated earlier, we don’t break out the specific components of the amounts. As we indicated, we had modest deterioration in the core gross margin and due to the breakage in the gift card quarter we’ve had a favourable experience there that we were able to offset that. But we don’t break out the individual components.

Dana Cohen – Banc of America Securities

And was this the first time you took the gift card breakage?

Kevin Wills

That is something that we evaluate periodically and we have a favourable adjustment in the quarter.

Dana Cohen – Banc of America Securities

No, I understand that, but companies have been announcing this and putting these out and, you know, it’s the first time they ever did it. Because that’s the accumulative effect of all of them. So is this the first time you’ve done this?

Kevin Wills

It is not the first time we have done this. We have, again, we evaluate this periodically.

Dana Cohen – Banc of America Securities

Okay. And then my other question is, on the guidance for the fourth quarter, given that you’re not changing your guidance for the year in terms of operating margin, but you sound more conservative on gross margin, is the offset SG&A? Is that the way we should think about it? Or is it the fact that sales have been coming in better?

Kevin Wills

This is Kevin. I’ll start and Steve may want to finish. But again, we indicated their outlook on the sales is high single digits for the quarter. We would anticipate probably more SG&A leverage in the fourth quarter than you saw us deliver in the third quarter.

If you recall, we started getting some SG&A leverage in 2006 and in the third quarter of 2006 was our high water mark relative to SG&A leverage in which we delivered about 300 basis points of leverage in SG&A ex-items. So from a comparison perspective a third quarter SG&A was a little harder than what we anticipate in the fourth quarter.

Dana Cohen – Banc of America Securities

And last question, I just want to go over, you said that the sort of change in the environment is primarily at sort of the lower price points. I just want to confirm that. So it’s really a bridge issue and as you scale up, you know, sort of, that you’ve seen the same trends.

Stephen I. Sadove

I’m sorry, Dana. Yeah, I think that that’s an accurate way of portraying it is that the more pressure is at the bridge price points than we’re seeing at the higher price points.

Dana Cohen – Banc of America Securities

So when you commented that you’ve seen the customer shift their buying patterns and I guess there was a mixed shift to more of the friends and family or the event. Is that broad-based or is that primarily concentrated at the lower price points?

Stephen I. Sadove

No, I think you’re seeing some of that shift broad base. I think that even at the higher price points you’re seeing the consumer responding very well to the triple point or double point events or the points events or to the EGCs. So you’re seeing that impact cutting across the board. Where you’re seeing the more promote, the far more pressure in terms of mark downs or competitive environment is at the bridge price point.

Dana Cohen – Banc of America Securities

Thanks so much.

Operator

Your next question will come from the line of Christine Augustine with Bear Stearns.

Shelley – Bear Stearns

Hi, this is Shelly on Christine’s behalf. Third quarter results in the fourth quarter guidance seems to imply that you need about a high single-digit comp to leverage your buying and occupancy expenses and I’m just wondering if you’re being proactive in identifying any areas for possible cost cutting as business trends become even more difficult and where you think there’s still room to cut costs. And would that possibly include a consolidation of your stores and direct buying groups?

Stephen I. Sadove

I’ll make an overall comment and then return it to Kevin. I think we’ve done a very good job of managing the, right-sizing the cost base of this company. Remember, you step back a year ago, this was a holding company that had, that was Birmingham based, that had the department stores as well as Saks Fifth Avenue. If you look at the corporate overhead, the infrastructure, we’ve downsized the center dramatically. If you were to look at our IT support or any of the central functions they’ve been reduced by roughly half. And I think that we’ve done a, you know, moved the corporate headquarters to New York, recreated a number of the functions and done it without a hiccup relative to the management of the business.

As we look at the corporate cost structure we think that there are some opportunities. They’re more modest than the dramatic cuts that we’ve made and we’re continuing to look at it. Part of the, you know, we wanted to be very cautious as we went forward on managing some of the costs down because we had to deliver against the running of the business. But there continue to be operational improvement opportunities.

As it relates to the store base, we’ve said along the way that as we enter into the parallel planning process and the nine-box grid that we were going to have a game plan or growth plan by store that would lead it to an acceptable level of profitability. We’re into that over the course of this year and feeling good across the board of the improvement on a store-by-store basis. If and when the time were to come that we weren’t to feel good about the progress that some stores, individual stores were making and feel that we couldn’t get to where we wanted to then obviously we would relook at some of the stores. But I feel quite good about it.

As it relates to consolidation of the organization, you know, right now we don’t believe that, we feel very good about the Direct growth and the operation and the organization and that it is a different business. What the buyers are doing in the Direct business is different in many ways than what the buyers are doing in the full line basis. There is a lot of opportunity for synergy between the groups, communication, working very closely together in terms of how we plan and how we promote the brands. I’m not so sure, and the buying organization in Direct is very, very small. It’s not a large number of people. So I’m not sure that the major opportunity would be consolidation of those buying organizations today. Obviously it’s the kind of thing that we would over time continue to look at, but I would not see that as being a near term opportunity.

I’m going to turn to Kevin to make any other comments on it.

Kevin Wills

I think Steve did a good job of summarizing, but specifically to your question on leverage in the buying group. As you heard us speak previously, we are making investments in our buying and planning organization in part based on the work we do with KSA. So as we’re looking at 2007 we are not seeing any appreciable leverage in those calls because again we’ve made a decision to invest in that business and try to get our planning ratio back up to what we believe to be an acceptable level.

Shelley – Bear Stearns

Okay. I just have one other question. Given the legal issues that you’ve had in the past with regard to vendor allowances, do you think that might hinder your ability to take future allowances if sales trends were to swell?

Stephen I. Sadove

No, we don’t see that having an impact at all. We have a very, very good relationship with the vendor community. We feel that we have no issue relative to collecting the appropriate level of vendor allowances on a go-forward basis.

Shelley – Bear Stearns

Okay. Great. Thank you.

Operator

Your next question will come from the line of Enya Watts with Sykes (sic).

Enya Watts – Sykes

Hello. Sorry, I joined the call late. You might have said this already. Can you estimate how much of your sales is driven by international buying?

Stephen I. Sadove

How much of our what?

Enya Watts – Sykes

How much of your sales is international buyers?

Stephen I. Sadove

The question, I think, if I understand, is the impact that international tourism has been having on our business. Is that correct?

Enya Watts – Sykes

That’s right.

Stephen I. Sadove

I think that clearly the weak dollar has had some tourism impact, especially in our gateway cities. New York especially. Perhaps some in Beverly Hills. I don’t think that it’s a huge number relative to moving the comp performance. We had very strong comp performance in the quarter. We saw outsized growth. In the New York market I think it probably, we don’t have specific numbers, it probably helped a couple points in our New York business. We feel very good about the impact that that’s having on the holiday season. So it’s a positive, clearly.

Enya Watts – Sykes

Great. And then, this actually may be a tough question as well in terms of the aspirational buyer. Do you know how much of your sales is to that population?

Stephen I. Sadove

It’s a hard question to answer. The specific numbers, I think, that if I were to look at one, you know, it’s sort of if I were to look just at bridge closing you would look at it and say, gee, that in and of itself might be 10% of your, in that range of your business, but you’ve got an aspirational customer, a customer who’s buying good, the bridge price points across other categories as well. I don’t have a specific number. It is not the majority of our business. Our majority, much bigger piece of our business is at the higher price points. But it’s, obviously there is that aspirational customer.

Enya Watts – Sykes

Great. Thank you.

Operator

Your next question will come from the line of Todd Slater with Lazard Capital Markets.

Todd Slater – Lazard Freres

Thanks and let me add my congratulations on your continued recovery here.

Stephen I. Sadove

Thanks, Todd.

Todd Slater – Lazard Freres

Just a quick question for Ron, a follow up on the bridge category. If it’s about 10% of your total is there a way to reduce that order a little bit given the weakness there and increase exposure to and invest some of the inventory in some of these higher margin or better trending categories like hand bags and jewellery and stuff like that?

Ronald L. Frasch

Todd, thank you. Clearly we have made what we think is the appropriate downsizing of those businesses to better balance our inventories. And quite frankly, we’ve found great support from the vendor community in support of our initiative.

Todd Slater – Lazard Freres

Okay. And then obviously the results in footwear and that floor conversion have been phenomenal. I’m wondering if you could just talk about what you can apply from that experience to, let’s say, other areas of the store? Maybe you can talk about any initiatives that you may have in ’08 in some of the other key parts of the store.

Ronald L. Frasch

The biggest initiative we have on the table that we are prepared to discuss right now for ’08 is the renovation of the New York third floor, which we will complete, which is our designer apparel floor. That will be over the period of ’08, probably mid to second half of ’08. And ’09 will be completely renovated. Not dissimilar to what we did to the shoe department on eight.

We also have a number of locations that we are going to initiate. Kind of a 10022-SHOE presence in out-of-town stores.

Stephen I. Sadove

Yeah. I think, Todd, that one of the lessons learned that we had from this, and Ron referred to it in his remarks, which is the power of fully integrated and cross-functional focus against a big idea and putting the resources to make it, whether it’s the product or the marketing or the floor presence, to make it a big idea. So we’re going to be doing that as it relates to the designer floor, but also some of the other ideas in terms of the renovations and the continued focussed renovations that we’re going to be doing.

I think that a couple comments are somewhat related. We feel remarkably good about the shoe floor and what has happened there, but whether it’s the Beverly Hills story or what we’ve done in Phoenix or Palm Beach Gardens, the renovations in Boston, the San Francisco and Chicago designer renovations, I think that they all point to that focused investment against ideas are what are going to drive the performance of this business. The numbers that we’ve been seeing are despite being under construction in a number of these areas. So we ought to start to see the benefits of some of these renovations that we just completed as we go into ’08 as well. And then we’ll start the next phase of them.

Todd Slater – Lazard Freres

And if you are renovating the third floor next year, you said in mid to late ’08, are you going to have, try to have that accomplished before obviously the important holiday season and the risk that you run through holiday in that?

Stephen I. Sadove

It’ll be in a phased basis. So we’ll be able to, you know, clearly there’s going to be some disruption as we go through the construction, but it’ll, you know, we’ll try to do this into two phases, basically.

Todd Slater – Lazard Freres

Okay. All right. Great. And then just on the Direct side. I’m wondering if you could just talk about any thinking you might have on returning to the catalogue business and whether or not this could be leveragable on obviously your very strong direct platform?

Stephen I. Sadove

Yeah, I think that, you know, I don’t want to commit to saying one thing or another relative to, you know, clearly catalogues, we were in the catalogue business. We had a business that was discontinued about five years ago called Folio. That was a relatively big business. It wasn’t a very profitable business, but it was a big business. I’m not so sure that getting us back into the catalogue business today is necessarily the right answer. There may be some focused small catalogues. We did some Saks suggests Saks.com catalogues that supported the Direct business. I think that may make sense. I’m not so sure that re-entering the catalogue business in a big way right now is the right answer for us. We certainly will look at it.

If you look at most of our competitors, they’re actually moving away from catalogues as we speak. So it’s not a black-and-white issue. There may be some rollouts, some focused catalogues to support Direct that make some sense.

Todd Slater – Lazard Freres

Okay. And then just one sort of longer term question that’s back to the operating margin. As they expand from, let’s say, 4% to 8% over time, can you just remind us again what you think the, how the components of gross margin and SG&A break out in that expansion. Is it roughly evenly split? Is there larger leverage on expense or larger gross margin component of that operating margin improvement?

Stephen I. Sadove

You know, we’ve never given detailed breakout of the split between gross margin SG&A. I would tell you that there’s substantial opportunity in both and that you’re going to see, you know, I don’t want to get into if it’s a 55-45 or a 60-40 split. I would tell you that they’re both going to be able to generate meaningful improvement. To get the kind of improvement that you’re talking about they’re both going to be predicated on continued outsized top-line growth in terms of the productivity increases in our stores.

As you’re all familiar with our focus is on increasing the productivity of the current store base, not opening up lots of new stores. It’s more of what we’ve just been talking about in terms of the renovations and the focused Denver additions and focused shops and that top-line growth coupled with the planning and assortment, the KSA work that Ron referred to, the improved selling culture, the more full price selling, leveraging that top-line growth by very, very tightly controlling the absolute dollar increases of our cost base recognizing that a portion of it is variable with sales because of the conditioned environment, but that the non-commissioned part of it we’d be very, very diligent relative to allowing any cost increases. That’s going to drive the increases that we talk about in margin.

Todd Slater – Lazard Freres

Perfect. That’s very good colour and all the best in the holiday.

Stephen I. Sadove

Thanks a lot.

Operator

Your next question will come from the line of Carla Casella with JPMorgan.

Carla Casella – JPMorgan

Hi. You talked a bit about the inventory ending the quarter a bit higher and I’m wondering how you feel that stands as of the mid-November? Is that in line? Are you seeing that come down as you would expect?

Stephen I. Sadove

Yeah, I’m not going to come in in terms of mid-quarter, mid-month or mid-quarter performance. As of the end of October, which is what we just reported, you know, I felt very good about where we ended up on the comp inventory. It was right in line with where we expected and hoped it to be.

Remember, if you go back in terms of a year ago, last year’s comp inventory increase at the end of the third quarter was in the 3% range. It was right when we had started the investment and inventory that we believe was required to get the business going again. So that was coming off of that lower number. As you look at the fourth quarter number you’re going to be looking at last year’s fourth quarter, which was at a 21% comp inventory increase because that’s when we started putting that product in. And that’s why we now are feeling comfortable that we’re going to be able to start bringing the inventories back in line with our growth rate and we feel comfortable that we’re on a path that’s going to get us to the right levels and inventory by the end of the quarter.

Carla Casella – JPMorgan

Okay. Great. That’s helpful. And then on the one-time post-tax item, specifically the $2.7 million for the investigation. What is that on the pre-tax basis?

Kevin Wills

Kevin. You could assume a 40% effective tax rate. So on a pre-tax basis it would be in the neighbourhood of $4.5 million to $5 million.

Carla Casella – JPMorgan

Okay. Great. And then your footwear, hand bags, and fine jewellery are so strong. Do you think, do you know who you think you’re taking share from?

Stephen I. Sadove

Oh, gosh, you know, that’s such a hard question because part of it is a market expansion. You’ve got, there’s a growth, you know, you have a luxury customer who is increasing their purchases. So there’s a market aspect of this. I can’t tell you whether, I think if I were to look at our vendors, you can look at the reports from a Gucci, Louis Vuitton, Chanel, where there are public, where there are filings in terms of the external reports where they’re performing exceptionally well, too. So I think what you’re finding is that there is such a demand for the luxury products I believe that is a long-term secular growth driven by culture, driven by the economics of the higher end consumer. That you’re seeing market growth that we’re benefitting from.

Are we in a market-by-market basis, are we potentially taking share from a competitor in a given market? I’m sure that that may be the case. But I think that you have a much larger dynamic going on here.

Carla Casella – JPMorgan

Okay. And I have two quick housekeeping items. What’s the total square footage of the New York Saks store?

Stephen I. Sadove

I think that the total gross number, meaning front of house and back of house, is about 650,000 square feet.

Carla Casella – JPMorgan

Okay.

Stephen I. Sadove

That’s including non-selling as well.

Carla Casella – JPMorgan

So selling might be closer to 600 then?

Stephen I. Sadove

No, no. It would be a lot less than that. It might be 400. Somewhere in that range.

Carla Casella – JPMorgan

Okay. And then did you buy back any additional bonds in the quarter or should your bonds outstanding be the same as they were last quarter?

Stephen I. Sadove

We did not buy any additional bonds this quarter.

Carla Casella – JPMorgan

Okay. Great. Thank you.

Operator

Your next question will come from the line of John Lowman with KDP Investments.

John Lowman – KDP Investments

Hey, good morning, gentlemen. Thank you for the call. I wanted to talk about the growth in the Direct business. You believe it’s going to be outsized. Do you think that growth is going to come at some market share to the stores or do you see that the growth is going to be coming from consumers in areas where Saks currently doesn’t have a footprint?

Stephen I. Sadove

Yeah, it’s very interesting. It clearly is not, we don’t believe it’s going to come from the stores. And in fact, you know, there’s some component of it that’s going to come from customers who don’t obviously have a Saks near them. But what we’ve found over time is that multi-channel shopping, the customer who’s buying both in the store and online, is actually a driver of growth. And that customer who shops both channels has a much higher propensity to consume than the customer who’s only shopping one channel. So the two are working synergistically with each other.

John Lowman – KDP Investments

So basically what you’re saying is the customer who shops at Saks Fifth Avenue may just do additional impulse shopping, if you will, online as opposed to going to the store.

Stephen I. Sadove

You have some of that going on, absolutely. They also may go on line and vice-versa. They may go on line, they find some items, they may find an item that they don’t, that doesn’t fit right, they then may bring it back to the store. When they bring it back to the store they may exchange it and buy more items so that there’s a trade-up effect that goes on. So there’s a lot of interaction between the two channels.

And we’re also finding more and more because with the new point-of-sale system you’re able to directly access our online business so you have associates, if there isn’t an item available in the store, there are now sourcing the item directly from the Direct channel as well.

John Lowman – KDP Investments

Yeah. That’s true. That’s good colour. On the luxury consumer you’d mentioned in this call, and I think in previous calls, their outlook looks fine and you had balled it up with the stock market performance. Do you still see, for analysts, that that’s really a key factor of what we should be monitoring to see any potential deterioration or appreciation in the luxury consumers demand for your goods?

Stephen I. Sadove

Yeah, I’ve always used that as a surrogate. I think it’s a good one in terms of that our customer is more, you know, because it’s a confidence issue and it’s how do they feel about themselves and their personal wealth and the outlook for the future that add a, you know, with the DOW at a 13,000 level our customer feels good about themselves. You know, if you see within a plus or minus range, a modest range, I don’t see that as affecting their outlook on the future. If you told me that the DOW was going to be at 10,000 or some number below that I might get more concerned about how our customer’s going to be feeling. But they have not been affected by the $3.50 gas price. They’re not affected directly by the sub-prime or their mortgages or default or anything like that. But clearly they are affected, you’ll have a narrow segment that may be affected by a Wall Street bonus being lower, but even at a 10% to 15% drop, which is the projected drop on Wall Street bonuses, I don’t believe that that’s going to affect their attitude towards their personal shopping.

I would tell you that we track, for example, nobody’s asked this, but tracking our credit cards. We’ve had essentially very, very little, if any, deterioration in our credit card base or delinquencies or anything like that.

John Lowman – KDP Investments

You’re answering my follow up question. One last thing. You’d mentioned your target for debt to or funded debt to EBIDTA about 2.5 times. As you measure EBIDTA, where do you see that target at currently?

Stephen I. Sadove

I’m sorry, when you say that –

John Lowman – KDP Investments

The question is, where would the funded debt to EBIDTA right now?

Stephen I. Sadove

As we’ve indicated, our funded debt to EBIDTA target is less than 2.5 times and we currently believe on an LTM basis, if we look at our EBIDTA ex certain times that we’re under the 2.5 times now.

John Lowman – KDP Investments

Okay. All right. Thank you, gentlemen. And good success in the upcoming holiday.

Stephen I. Sadove

Thanks.

Operator

Your next question will come from the line of Robert Drbul with Lehman Brothers.

Hillary Morrison – Lehman Brothers

Hi. This is actually Hillary Morrison calling in for Bob. I’m hoping you can talk about the percentage of your sales that are now private label and off set versus last year and what level of penetration you’re working towards?

Also I was wondering, given the more challenging promotional environment, do you have any promotional events planned incrementally this year?

And also, you may have covered this, but also could you talk about the comp cadence for November versus December?

Thanks.

Stephen I. Sadove

Okay, what’s the last question?

Hillary Morrison – Lehman Brothers

The comp cadence for November versus December given the shift.

Stephen I. Sadove

Comp cadence. Okay. There’s several questions there. Let me just tick them off. On private brand, as you start with private brand is a small component of our business. People shop Saks for the brand. It’s a house of brands. Private brand does play a role in some classification businesses where vendors aren’t providing what we think is a, you know, providing what we think is meeting our customers’ needs. It had been discontinued in the last year. We’ve gotten back into the business with, under the Saks Fifth Avenue label with Classic and Sports signature. I think we’ve gotten off to a good start with that. I feel very optimistic. Some of it’s done better than others. But I feel good about where we are. I think there’s an opportunity to continue to build that business.

It will never be the kind of percentages that you see in some of the traditional department stores. This isn’t a 20% of a Saks business. Maybe it’s a mid-single-digit type of a number, but it’s going to play a role and we had a meaningful business several years ago with real clothes. So we know that there is a business to be had and we’ll continue to evolve and modestly grow that business.

Right now Ron is working very hard in terms of identifying what the right business system is and how we should source it and whether or not we ought to be using the vendor community or direct sourcing the product. But I do see an opportunity there.

The second question on Off Fifth. You know, we don’t break out for reporting purposes Off Fifth as a segment, so we don’t give the specific percentage of the business. It is not, you know, first of all, I feel very good about Off Fifth. We’re seeing substantially improved performance. We’re seeing good margin performance, operating margin performance on the business, and top-line growth during the quarter. We’ve moved the strategy of that business away from doing just a sell off business to more of a distribution channel where we are sourcing the business directly, as well as using our vendors to cut product directly for Off Fifth. That strategy is appearing to be successful and that offers substantial growth opportunities for us both in terms of same store as well as geographic expansion. So we feel quite good about the opportunity there.

Let me turn to Kevin to speak to cadence for November-December.

Kevin Wills

As we’d indicated, we expect to see outsized growth in November and below average comp sales growth in December due to the calendar shift.

I believe your other question was, was there anticipated to be an increase in fourth quarter promotions? Right now we’d certainly say that our fourth quarter promotional calendar to be relatively constant with the prior year.

Hillary Morrison – Lehman Brothers

Great. Thanks so much.

Operator

Your next question will come from the line of Michelle Tan with UBS.

Michelle Tan – UBS

Just a couple of questions. The first one was on the growth margin guidance for a modest decline in the fourth quarter. Just looking at it it seems like, that the compares are pretty tough, as you noted, versus third quarter when the merchandise margin was down. You’ve also got the 50 basis points benefit from the 50 that you observed last year. So can you help us think about what some offsets to those kind of pressures might be to help keep the decline relatively modest in the fourth quarter?

And then also, I know you don’t own it anymore, but do you have any reads from the credit card data that you see on your private label card? Thanks.

Stephen I. Sadove

Michelle, we’re hearing about every other word, so tell me if we’re not answering what you’re looking for. It was breaking up.

I think the second part of your question was on the credit cards, which I think was what we had talked about a few minutes ago, which was, we have not seen deterioration on the credit cards in terms of the portfolio, our credit card Saks First customer, and the penetration of credit cards is holding up very nicely. We’re seeing outsized growth among our Saks First customers, so we feel good about their purchase patterns and behaviours. So we feel actually quite good about both the portfolio and the state of the Saks customer.

In terms of the gross margin performance, one of the things that you want to look at, we did, we’ve stated that last year was benefitted 50 basis points or so by the 53rd week. We also have always stated that you are always going to have a tougher time in terms of gross margin improvement on a third quarter versus a fourth quarter or first quarter versus a second quarter because if you buy appropriately you’re going to have, you know, as we do a much better job of buying and allocating product you’re going to have less markdowns. They give more of an opportunity for improvement in the fourth and the second quarters than you would in the first and third quarters. So that would be one of the things as you look at it as we’re looking at a quarter to quarter basis.

I don’t know, Kevin, if there’s anything you want to add.

Kevin Wills

I think that’s right, Steve. Michelle, did we answer your question?

Michelle Tan – UBS

You did. Thanks a lot. Sorry for the bad connection.

Stephen I. Sadove

Okay. No problem.

Operator

Your next question will come from the line of Dana Telsey with Telsey Advisory Group.

Dana Telsey – Telsey Advisory Group

Hi. Good morning.

Stephen I. Sadove

Good morning, Dana.

Dana Telsey – Telsey Advisory Group

Good morning. Could you expand a little bit just on the KSA initiatives and what the benefits could be next year and how much a part of getting to that 8% operating margin target in three years do you see it as? And are there any other initiatives that we should expect that are new or different coming up next year that would be helpful? Thank you.

Stephen I. Sadove

All right. That’s a great question. I view the KSA initiatives as being some of the most important ones in this company. I’ll talk for a moment and then I’m going to let Ron talk.

They cut across two areas, both the merchandising side, the planning allocation, how we go to market, how we assort, and then the selling side, which is evolving the selling culture of the company. And getting clarity. Getting our sales associates to focus on full price selling. Getting our department managers to spend their time on the floor with the associates as opposed to in the back room trying to do some of the operational work because that wasn’t being done in the most efficient manner.

So these two initiatives are, and they are intertwined, as Ron had said, are so fundamental to becoming a better merchandising and selling organization. And within those two marketing is the third leg of the stool because if you have the right product and you have the right selling having the right local marketing supporting them becomes a part of that as well. So I can’t think of anything that’s more important.

Clearly, as we think about other initiatives, we’re going to be taking the concept of capital investment in focus stores where we think we can get a good return on investment with vendor shops and jewellery departments and the designer kind of floors. That’s a major focus. It’s the same strategy as we started this year, but it’s a different set of stores. We’ll announce what those stores are when we, you know, at an appropriate time when we talk about the ’08 plan.

But I feel very good about focused capital, focused merchandising planning and allocation, and excelling culture initiatives that’s driving it. Let me have Ron talk a little bit about what he sees happening as it relates to what you can see in the ’08 performance.

Ronald L. Frasch

Well, Dana, maybe just a little bit of background if I might because I know Steve has spoken before about some of the cultural challenges that have existed here for a long time. A big part of it has been getting people’s roles and responsibilities aligned with our expectations. Perhaps the most significant component of the KSA project work are getting people aligned with what we want them to do. There’s been some tremendous cultural changes. I must say that there’s been some road bumps, but as we’ve gotten through it we’ve been enormously transparent with the organization about what, the road thus far, but we’ve had terrific success and a great embracing of the projects, particularly the KSA merchandising projects.

Now, going into the stores project, this has begun with a test in a handful of stores in the southern region and will run for a few months and then we’ll decide, we’ll go through the same learning curve and then roll it out to more stores. But the –

Stephen I. Sadove

That’s right. I think it’s fair to say, as Ron talks about some of the tips, we’re finding some early on things, findings that are very, really quite interesting and exciting in terms of how we can get product from the back room onto the floor quicker, how we can get the department managers focusing their time working with their selling associates. We have some data that was indicating that there was a substantial amount about the department manager’s time that was, it wasn’t that they weren’t working hard, but they weren’t spending their time on the floor and the associates, the selling associates weren’t selling on the floors efficiently. So there’s a lot of quick wins that we think we can get here.

Ronald L. Frasch

And the KSA merchandising side, also, getting the learning that we’re finding about getting the right product and the right store, providing a much enhanced training environment for our planners and buyers. The learnings have been terrific. So we know we’re going to see impact in the spring season with men and as we go forward for the balance of the company in the second half of ’08 and beginning of ’09.

Dana Telsey – Telsey Advisory Group

Thank you very much.

Operator

Your next question is a follow up question from the line of Dana Cohen with Banc of America.

Dana Cohen – Banc of America Securities

Yeah, hi, guys. Two quick follow ups. The category that you talked about, the 10% that’s the bridge business that is the issue, is that just traditional bridge or does that include contemporary?

Stephen I. Sadove

That would be traditional bridge.

Dana Cohen – Banc of America Securities

Okay. And that’s really the issue with not, you know, it’s really just the traditional bridge brands.

Stephen I. Sadove

Yeah.

Dana Cohen – Banc of America Securities

Okay. And then when you said that the, you’ve seen the outsized growth in the Saks First customer, would that mean that the penetration of the card business is actually up year over year?

Stephen I. Sadove

We’re talking, you’re not talking difference between the two. It’s relatively flat.

Dana Cohen – Banc of America Securities

Okay. Perfect. Thanks, guys.

Operator

And at this time there are no further questions.

Stephen I. Sadove

Well, thank you all very much for joining us on the call. We look forward to talking to you again. Thanks a lot.

Operator

Ladies and gentlemen, this does conclude the Saks Incorporated third quarter earnings conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Saks Q3 2007 Earnings Call Transcript
This Transcript
All Transcripts